Retail occupancy still high

Shopping centre owners have kept their malls well occupied and in demand as investments despite last year being one of the worst on record for retail spending.

Retail turnover fell by 0.1 per cent in December, capping a poor year for sales, Australian Bureau of Statistics data released on Monday revealed.

Several major retail chains collapsed last year leading to shop closures, but in December specialty store vacancy rates in all shopping centre categories were near or below the average over 15 years, Jones Lang LaSalle’s figures show.

Regional shopping centres were 98.5 per cent occupied at the end of last year, dragged down by south- east Queensland and Canberra which had higher vacancy rates than other areas.

In sub-regional malls, the specialty store vacancy rate was 2.8 per cent at the end of last year, down from 3.3 per cent in July.

In neighbourhood centres, the vacancy rate was 4.7 per cent in the fourth quarter, well below the 6.1 per cent average over 15 years.

“Weakness in retail spending is now manifesting itself in different ways," Jones Lang LaSalle senior research analyst Andrew Quillfeldt said. “Tenant demand certainly weakened over 2011 as a result of slow retail turnover growth, particularly in the discretionary spending categories. This has put increased pressure on landlords to maintain occupancy levels and rental growth has slowed significantly."

The average rent increase on renewal was just over 5 per cent in 2010-11, down on 8 per cent in 2008-09, Leaseinfo.com.au found. Sub-regional centres did better than most, securing average rent rises of about 9.5 per cent.

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While conditions were tough for retailers, investors snapped up shopping centres, particularly in the sub-$50 million price range.

A total of $2.6 billion worth of retail property was transacted last year, with more than half of that for centres worth $10 million to $50 million, according to Savills. Private investors accounted for 42 per cent of the transactions.